Meat+Poultry - July 2019 - 38

INDUSTRY OUTLOOK

China had 19 percent
fewer hogs in March
than it did a year ago
because of African Swine
Fever. The disease has the
potential to impact the pork
industry across the globe.

Increased exports to China will depend on
whether China lifts its tariffs and how badly it
needs US pork. The tariffs bit into US exports
last year. A combined China/Hong Kong bought
495,637 mt of US pork in 2017 but only 351,774
mt in 2018. But China's purchases in the last
two weeks of April this year totaled 101,200 mt
as ASF took its toll.
China had 19 percent fewer hogs in March
than a year ago, estimated its agricultural
ministry. This would cut the global pork
supply by 6 percent on an annualized basis,
according to Heather Jones, a financial analyst
with investment firm Vertical Group. Earlier,
Chinese officials had warned that pork prices
in China could surge more than 70 percent
this year.
Increased Chinese buying would benefit
US pork processors, all of whom suffered
much lower pork profits last year than the
year before. Tyson Foods had pork operating
income of $361 million in fiscal 2018 (ended
Sept. 29), versus $648 million in 2017. Tyson in
March gained approval for two plants in Iowa
to begin shipping pork to China, the first such
approval for US pork facilities since January
2016, according to USDA data. JBS USA Pork
had a 2018 EBITDA of $537 million versus $780
million in 2017. More buying would be a boon
for Prestage Farms, which opened a new $309
million pork processing plant in Iowa in March.
A global drawdown in pork supplies will
also boost poultry processors, say analysts.
Chickens' much shorter lifespan allow
producers to expand production quickly,
and Chinese consumers are expected to
supplement some of the pork they would have

MEAT+ POULTRY | 07.19 | www.meatpoultry.com

bought with poultry, as The Wall Street Journal
noted in an April 29 article. China is going to
import much more protein this year, Andre
Noguiera, head of JBS USA, told analysts on a
March 29 conference call.
"ASF has the potential to impact the
global protein industry on a level that we have
never experienced, and it is an event that will
underscore the power of the Tyson business
model," Tyson President and CEO Noel White
told analysts on a May 6 conference call. "A
worldwide decrease in pork supply would offer
significant upside to our pork business, while
also lifting the chicken and beef businesses as
substitutes and increasing raw material costs
in our prepared foods business."
Tyson's protein businesses in fiscal 2018
had operating income of $2.240 billion ($1.013
billion for beef, $361 million for pork and $866
million for chicken). Income for the first six
months of fiscal 2019 totaled $957 million ($461
million for beef, $195 million for pork and $301
million for chicken). This was somewhat lower
than the combined $1.067 billion in the first
half of fiscal 2018. JBS USA in 2018 had $3.054
billion in EBITDA ($1.719 billion for beef, $537
million for pork and $798 million for chicken).
The bottom line is that depending on how
the trade variables play out, US meat and
poultry companies will have another excellent
year. Beef profits look set to challenge or
exceed 2018's records while pork profits might
return to their levels prior to the imposition of
retaliatory tariffs. The US meat and livestock
industry however will be holding its breath
that, in the event of USMCA not being ratified,
President Trump does not carry out a threat to
withdraw from NAFTA.

zhang yongxin - stock.adobe.com

38

CHALLENGES IN CHINA
http://www.meatpoultry.com
Meat+Poultry - July 2019

Table of Contents for the Digital Edition of Meat+Poultry - July 2019
